Twenty four leases, twenty four percentages, and the percentages in the leases add up to one hundred. The money only reconciles when it is divided by twenty five, and it has done for nine years.
I am a chartered accountant and part of my work is service charge accounts for residential blocks. Small blocks, mostly, for managing agents and a few resident companies.
The arithmetic is the whole job so I will set it out.
A block has a total expenditure for the year: insurance, cleaning, lighting, the lift contract, the managing agent's fee, a reserve fund contribution. That total is divided between the flats in fixed proportions, and those proportions are in the leases. Flat 1 pays 4.1 per cent, flat 2 pays 3.8, and so on.
The proportions must add up to one hundred per cent. If they add up to ninety eight the landlord is two per cent out of pocket for ever, and if they add up to a hundred and two the landlord is collecting money it is not entitled to, which is a breach of the lease and recoverable.
So the first thing anybody does with a new block is add up the schedule. I have done it perhaps two hundred times.
The block in this story has twenty four flats.
I can be more precise than that, which matters. It has twenty four leases registered at the Land Registry. It has twenty four front doors. It is a 1930s four storey block, six flats to a floor, and I have walked it.
The apportionment schedule in the leases adds up to one hundred point zero zero per cent across those twenty four.
The accounts do not balance on twenty four.
This is where I have to be careful, because it sounds like a rounding complaint and it is not.
Here is what happens. I take the expenditure, I apply the schedule, I produce the demands. The agent issues them. Over the year the money comes in and at the year end I reconcile receipts against demands.
Every year, the receipts exceed the demands by between three point nine and four point two per cent of the total.
Four per cent of twenty five is one. One flat's worth of money, near enough, arriving every year against demands that were never issued.
The obvious answers, and I have spent more unbilled hours on this than I would admit to a partner.
Somebody overpaying. This is the first thing you check and it is easy, because receipts are allocated to a flat by reference. Every flat's ledger balances to its own demands. Nobody is overpaying.
A credit from a previous year. Checked, cleared, and the opening and closing balances tie.
Interest. The client account earns interest and it has to be credited to the service charge fund, and it is, on a separate line, and it is a fraction of a per cent.
A flat I do not know about. This was my working theory for two years and I went at it properly. I got the title plan for the whole building from the Land Registry, all twenty four leasehold titles and the freehold, and the plans laid over each other cover the whole footprint of the building with no gap except the communal stair, the bin store and the roof void.
And then the money itself, which is where I stopped being able to file this under rounding. The surplus arrives as payments, into a client account, with references.
The references.
Every demand carries a reference of the form the agent uses, which is the block code, the flat number, and the quarter. Flat 14 in the second quarter of 2024 is a specific string.
The surplus arrives as four payments a year, one per quarter, by bank transfer, and the reference on each one is in exactly that format, correctly formed, with a flat number in it.
The flat number is 25.
I have the bank statements. The payer name is the same on every one and it is a name, a person's name, not a company.
Nothing else about the payments is unusual. They come from a bank in this country, they arrive within a week of the demand date, and the amounts are correct for a flat of the size that 25 would be if the block ran to twenty five, which I have worked out two different ways from the apportionment schedule and which comes out the same.
Somebody is receiving a demand we do not send, for a flat that does not exist, and paying it on time.
What I have done about it, professionally, which is the part that matters and the part I will be judged on if this ever comes out.
I have not kept the money.
The surplus sits in the client account in a suspense ledger, with a note, and it has done since 2017, and it is now a little over nineteen thousand pounds. It is not in the service charge accounts as income. It is not in the reserve fund. The accounts I certify show the twenty four flats and the hundred per cent and nothing else, and they are right.
I have told the managing agent, three times, in writing. The first two responses were that it was a duplicate payment and to return it to the payer.
You cannot return a payment to a payer the bank cannot identify. I have asked. Their fraud team were helpful and said the originating account details are valid and the payment is not flagged, and that they could not give me an address, and that if I wanted to return it I should do so to the originating account.
I did, in 2019, for one quarter. Four thousand two hundred pounds, sent back to the account it came from.
It came back eleven days later, with a reference of its own, and the reference was the block code, flat 25, and the word ARREARS.
The last thing, which has nothing to do with accounting and which is why I have written this instead of leaving it in a suspense ledger for another nine years.
In the March I went to the block, which I almost never do, because the agent had a question about the bin store that needed a measurement.
The front doors are in the communal stair, six to a floor, and they are numbered on little brass plates that have clearly been there since the building went up.
I counted them. Twenty four.
On the top landing, past flat 24, the stair carries on for four more steps to a door to the roof void, which is padlocked, and which is in the freehold title and is nobody's flat.
Somebody has put a brass plate on it. The same size, the same font, the same screws, the same wear, and it is darkened and polished the way the others are, and I got down on my knees on that landing with my glasses up on my head to be sure of what I was reading.
It says 25.